How to Start Estate Planning: A Step-by-Step Guide
Every person is going to pass away at some point. It is definitely not a fun thought, but confronting it now allows you to stay in control. If you are an adult, I am willing to bet that you own at least something—and hopefully many somethings. Taking the first steps in the estate planning process can seem daunting, especially when you do not know where to start. Thankfully, Thompson Legal has created a guideline for your blueprint. Please note every situation is unique and it's advisable to speak with an attorney. Contact Thompson Legal to speak with a Michigan Estate and Trust Planning attorney.
What is Estate Planning?
Estate planning is the process of creating a blueprint for how your affairs to be handled when you are no longer able to manage those decisions. This proactive process allows you to designate beneficiaries for your assets, minimizing confusion and potential conflict among loved ones. It also empowers you to make crucial decisions about your care in case of incapacity, safeguarding your health and well-being during vulnerable times. It allows you to designate guardians for your minor children and avoid the need for future guardianships and conservatorships.
Why is Estate Planning Important?
Estate Planning is important for several reasons, it allows you to decide who inherits your assets and how they are distributed. Without a plan, the state will decide according to its laws, which may not align with your wishes. A clear plan reduces the risk of confusion and arguments among your loved ones about your intentions. In case you become incapacitated, you can designate someone you trust to make financial and medical decisions on your behalf.
Estate planning allows you to designate guardians to care for your children and manage their inheritance until they reach adulthood. Estate planning strategies can help minimize estate and inheritance taxes for your beneficiaries. It can also provide peace of mind for your loved ones knowing your affairs are in order.
Even if you are young or think your estate is too small, estate planning is still important. It's not just about wealth or age; it's about ensuring your wishes are respected and your loved ones are taken care of during a difficult time because anything could happen.
How Do I Get Started With Estate Planning?
Taking the first steps in your estate plan may seem overwhelming or boring, but we can guarantee you will feel more confident about your future after you’ve made these decisions. Getting started is straightforward! Here is a step-by-step guide to begin formulating your estate plan:
Set your goals: When you begin estate planning, it is important to determine what you aim to achieve with your estate plan, and the specific parties you want to inherit and oversee the estate. Let these goals shape your decisions through the planning process.
Take inventory of your assets and debts: This includes everything you own (house, car, bank accounts, retirement accounts, life insurance policies) and money you owe (loans, mortgages). Having a clear picture will help you distribute your estate effectively.
Choose your beneficiaries: These are the people or charities who will inherit your assets. Decide who gets what, and consider percentages if you want to be specific.
Choose your fiduciaries: These are the people who you trust to honor, execute, and oversee your wishes after you pass away. Make sure they are someone who is responsible and willing to openly communicate with all interested parties.
Review beneficiary designations: Review accounts like retirement plans and life insurance policies to ensure beneficiaries are up-to-date. These designations may override what's in your will.
Consider professional help: An estate planning attorney can guide you through the process, ensure documents are legally sound, and address complex situations (e.g., blended families, significant assets).
Create essential documents: These documents will specify your wishes and designate trusted individuals to manage your affairs. Some of the most common documents include:
Will: A legal document stating your wishes for distributing assets after you pass away. Wills can also name guardians for minor children and create testamentary trusts. Those with very simple estates might opt for the State of Michigan’s Statutory Will.
Power of Attorney: Names someone you trust to manage your finances if you're incapacitated (consider a separate power of attorney for healthcare decisions).
Trusts: allows you to transfer your assets into a separate entity (the Trust) for management and distribution for the benefit of beneficiaries.
Store your documents securely: Choose a safe place accessible to your executor or personal representative. Let them know where the documents are located.
Review and update your plan: Your estate plan should be a living document. Review it periodically, especially after major life changes (marriage, birth of a child, death of a beneficiary).
Additional Tips:
Consider naming a digital executor to manage your digital assets: This could include social media accounts, online documents, and even cryptocurrency holdings. You'll need to designate someone you trust to manage and distribute these digital assets according to your wishes.
If you have a complex estate or blended family, consulting with a financial advisor can be beneficial: They can help you with tax planning strategies and asset allocation to minimize the tax burden on your beneficiaries.
Be sure to communicate your wishes to your loved ones about your estate plan and keep them informed of any updates: Talking openly about your plans can help avoid surprises and disagreements later. Let them know who you've named in important roles and where you're storing your estate planning documents.
There are many online resources available that can provide general information and even basic legal documents. However, consulting with an experienced estate planning attorney is essential to ensure your plan is tailored to your specific situation and complies with state laws. If you are thinking of starting the estate planning process or have any questions, the Probate and Estate attorneys at Thompson Legal are prepared to assist you at any stage in your estate planning.
This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with an Estate Planning Attorney, please Contact Thompson Legal at (734) 743-1646 to schedule a consultation.
